Introduction to this report:
The company's performance for the first quarter of 2024 is basically in line with expectations. The supply and demand pattern of the filament industry is improving in 2024. The company's performance is expected to be maintained along with the filament boom, and the recovery of the refining and chemical industry opens up room for improvement.
Key points of investment:
Maintain the increase rating and raise the target price: due to the recovery in demand for filament, the price spread widened, but the refining and chemical industry was still under pressure, and the company's performance recovered in the later stages. We lowered the company's 2024 EPS to 1.40 yuan (originally 1.55 yuan), raised the 2025 EPS to 1.85 yuan (originally 1.81 yuan), and added 2026 EPS to 2.53 yuan. Combined with comparable company valuations, the 2024 PE14.5X was raised, and the target price was raised to 20.3 yuan (originally 18.60 yuan), maintaining an increase in holdings rating.
The results for the first quarter of 2024 are basically in line with expectations: the company achieved revenue of 82.64 billion yuan in 2023, +33.3% year-on-year, and net profit to mother of 797 million yuan, +539.1% year-on-year. In the 2024Q1 single quarter, revenue of 21.111 billion yuan was achieved, +32.66% year over year, and +1.02% month over month. Achieved net profit of 580 million yuan, +218.01% year-on-year and +644.30% month-on-month. Thanks to the recovery of the filament industry and the recovery of participation in Zhejiang Petrochemical, the performance is basically in line with market expectations.
The pattern of filament is improving, and the price difference is expected to widen: in 2024, the pattern of filament supply and demand will improve, the growth rate of new production capacity will slow down, and the concentration of small and medium-sized enterprises will accelerate and increase further. Downstream demand was strong after the 2024 Spring Festival, and the operating rate of looms increased, and the price of filament increased month-on-month.
The average price of 2024Q1POY/FDY/DTY was 6819/7357/7951 yuan/ton, respectively, +2.53%/+2.10%/+1.71% month-on-month. The high oil price background boosts expectations of downstream inventory replenishment, supported by downstream demand, and the strong will of leading companies to raise prices, and the filament price spread is expected to widen further.
Refining and chemicals are picking up, and investment income is expected to pick up: the company holds 20% of Zhejiang Petrochemical's shares, Zhejiang Petrochemical's net profit in 2023 is 1,367 million yuan, corresponding investment income of 273 million yuan, and the company's 2024Q1 investment income is 256 million yuan. The company's performance is expected to open up upward space with the recovery of the petrochemical industry.
Risk warning: risk of project application approval, risk of overseas geopolitical fluctuations.